What To Do When Management Has Lost Its Moral Compass: True Stories from the Blacktop
I had spent a week of MBWA and I determined our first business priority was to take a look at all the dealership’s people. My biggest concern was how they had been managed previously, getting into trouble due to lack of leadership and discipline. This dealership may have been the worst I had ever seen in my 47 years in the industry!
I retained the services of a forensic accounting team to audit the financial statements and general health of the company and it did not take them long to find a complete lack of internal controls. These are just some of the highlights of a dealership whose management had lost its moral compass:
Widespread use of company credit cards for personal purchases. In one instance, the General Manager had purchased $5,000 worth of guitars on the company card!
The employees were all using cell phones paid for by the company and had extended their phone plans to include family members without permission on the company’s dime.
Dealer plates were loaned out to employee relatives.
More than 10 company loaner vehicles had been loaned out to relatives of management for months at a time.
Demo vehicles were provided to all employees, from executives to technicians, at no charge.
Employees were allowed to charge more than $12,000 in parts purchases and repairs to vehicles and never repay the amounts.
New vehicle inventory included vehicles from 2017, 2018, and 2019, each with thousands of miles racked up by employees.
Used vehicles had costs added to them from the General Manager. In one case, these totaled $15,000 added to a $6,000 unit.
This type of fraud on the financial statement inflated the balance sheet and overstated profits in the amount of $2.5 million!
The audit revealed that most of these acts of theft and lack of discipline were at the direction of the General Manager. He had operated the company like his own personal “piggy bank.” He even told the employees that in lieu of raises or performance bonuses, they too could be included in his “looting” of the company. Some took him up on it.
After making these discoveries, I decided that my first big test in turning this dealership around should be grading the integrity of the employees and establishing ground rules for what management’s moral compass should look like.
I cancelled the credit cards and within three hours, I had two employees trying to buy items at a warehouse club for personal purchases. We cancelled the cell phone plans for the employees that were abusing. Two hours later I had five employees wanting to know why their family’s phones were not working! And I reported ten dealer plates stolen that were being used by relatives of employees. Two days later all of them had been returned.
A dealership that has the best processes, marketing, inventory, or pay plans cannot be successful if the leadership and the employees do not have business integrity! If your company is struggling, my advice is to take a step back and focus on your integrity. The rest may seem easy after the foundation of morality is built.